BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs and Gaming longs.I have not traded today, thus leaving the Portfolio 100% net long. The overall tone of the market is mildly bearish as the advance/decline line is slightly lower, most sectors are declining and volume is above average. Investor anxiety is slightly above average. Today’s overall market action is mildly bearish. The VIX is rising 1.7% and remains above average at 20.6. The ISE Sentiment Index is around average at 155.0 and the total put/call is below average at .82. Finally, the NYSE Arms has been running high most of the day and is currently 1.22.Fed fund futures currently imply a 78.7% chance for no rate cut and a 20.6% chance for a 25 basis point cut at the June 25 meeting.Investors initial negative reaction to today’s 25 basis point fed funds rate cut and less-hawkish-than-expected FOMC commentary seems overdone to me.The Fed did and said what was necessary to prepare the markets for an end to the long string of rate cuts, which should help strengthen the US dollar further and pressure commodities over the coming weeks.I suspect comments from Fed speakers over the next two months will become increasingly more hawkish as the June meeting approaches.Nikkei futures indicate an +51 open in Japan and DAX futures indicate an +13 open in Germany tomorrow.I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering and less economic pessimism.

- The cost to protect US corporate bonds from default fell to an almost four-month low after the Fed cut its benchmark interest rate for the seventh time since the global credit turmoil began last year.Credit-default swaps on the Markit CDX North America Investment Grade Index of 125 companies in the US and Canada dropped 4 basis points to 90 basis points as of 2:22 pm in NY, according to Phoenix Partners Group.

Xinhua:-China’s biggest trade fair received fewer buyers from developed economies and triggered fewer orders because of weak consumer demand in export markets, citing Xu Bing, a spokesman for the organizers.Visits from Japanese buyers plunged 28%.

Azzaman:- Iraq’s Kirkuk crude oil exports to the Turkish Mediterranean port of Ceyhan climbed to 430,000 barrels a day in April.Iraq built its Ceyhan crude stocks to 4.5 million barrels because there were no attacks against the pipeline or major disruptions this month.Iraq exported 323,000 barrels a day of Kirkuk crude in March.

- The 1Q Employment Cost Index rose .7% versus estimates of a .8% gain and a .8% increase in 4Q.

- The Chicago Purchasing Manager Index for April rose to 48.3 versus estimates of 47.5 and a reading of 48.2 in March.

- The ADP Employment Change for April was +10K versus estimates of -60K and +3K in March.

BOTTOM LINE:The US economy expanded at a .6% annual pace in the first quarter, Bloomberg reported.The Fed’s preferred inflation gauge, the core pce, rose at a 2.2% pace, down from 2.5% in 4Q.Investment in residential construction projects fell at an annual rate of 27% during the quarter, the most since 1981.The decline subtracted 1.23 percentage points from GDP.Housing has subtracted from growth since 1Q of 2006.Companies built back depleted inventories slightly at a $1.8 billion annual rate during 1Q, after an annualized decline of $18.3 billion in 4Q.Inventory re-building added .8 percentage point to growth last quarter.The trade deficit narrowed to an annual pace of $495.9 billion last quarter from $503.2 billion during 4Q.The smaller gap added .2 percent to growth.The ADP Employment report, also released today, showed companies unexpectedly added 10,000 jobs this month.Estimates ranged from a drop of 115,000 to a decline of 20,000.The ADP report only takes into account private employment and does not factor in government hiring.The report showed service providers added 64,000 workers, while construction jobs fell by 28,000.Employment at financial institutions surprisingly rose by 2,000.Small companies added 42,000 workers, while large ones pared their workforces by 18,000.According to Intrade.com, the odds the US enters recession this year are plunging to 31% today from 79% last month.I expect Friday’s jobs report to also exceed estimates of -75K.Many of the bears that currently dominate investor/media psychology in today’s “US negativity bubble” have been saying for over two years the US economy was plunging into a very bad recession and bear market.The DJIA is now only 7.4% from its all-time high.I still expect fiscal/monetary stimuli, a stronger US dollar, lower energy/food prices, decelerating inflation, better consumer sentiment, an improving job market, rising stock prices, less housing-related fear, an end to the credit market turmoil, relatively low interest rates, an end to the election uncertainty and an end to the American Axle strike to boost the economy further over the coming months.

- Argentine bonds show growing speculation that the country will default for the second time this decade as inflation and anti-government protests swell.The nation’s $10.8 billion of floating-rate dollar bonds due in 2012 yield 7.52 percentage points more than Treasuries of similar maturity.That implies an almost 20% chance of Argentina halting payments in the next two years, according to CSFB.

- China will become the world’s largest gold producer this year, overtaking South Africa, citing Hou Huimin, vice chairman of the China Gold Assoc.Production may reach 300 metric tons this year, up from 270.5 tons in 2007, citing data from the assoc.China added 650 tons of proven underground gold deposits in 2006, and has established five big gold mines since 2007.

- Commodity strength driven by global infrastructure growth theme.The demands of developing economies primarily in Asia, Latin America and the Middle East have been key factors in commodity price strength as the supply response has been more limited thus far.Yet, one should be concerned about the effect of the US slowdown’s lagged impact on production trends, not to mention weakening economic data in Europe and Japan.The week dollar has contributed to the commodities story too.Any reversal in the greenback’s fortunes also could roil the generally bullish commodity price outlooks that we see around the investment community, with energy and agricultural products being the areas with the most dedicated investors/supporters.Certain commodities have slipped in a somewhat stealth-like manner.While the broad picture for commodity prices still shows upward trajectory, a few commodities such as milk, cotton, gold and wheat have been slipping.Yet, this has been offset by oil strength alongside powerful rice and stainless steel prices. The infrastructure/global growth theme marks about 30% of the stock market’s value.In the latter 70s, the Energy sector soared to more than 30% of the S&P 500 total market capitalization and the same thing happened in the Information Technology sector in the late 1990s.Moreover, some investors were worried in the 2005-06 period when Financials got to more than 20% of the S&P 500’s market cap.Yet, global growth theme is bordering on 30% now and few seem to be concerned, which raises our anxiety levels.The ag stocks strength, in particular, is reminiscent of the Internet craze.Investors have become so thoroughly fascinated by the rising agricultural commodity prices, given the reactive nature of farmers looking to cash in on the associated profit potential.There are some scary similarities to the stock price activity of fertilizer and seed stocks relative to dot.com names back in the late 1990s.We remain very worried about these incredibly “crowded trades” that could unwind quickly.- Reiterated Buy on (MHP), target $51.

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and financial shares in the region.I expect US equities to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs, Computer longs, Internet longs and Commodity shorts.I have not traded today, thus leaving the Portfolio 100% net long. The overall tone of the market is neutral as the advance/decline line is slightly lower, most sectors are rising and volume is below average. Investor anxiety is slightly above average. Today’s overall market action is mildly bullish. The VIX is rising 1.4% and remains above average at 19.9. The ISE Sentiment Index is around average at 160.0 and the total put/call is above average at 1.06. Finally, the NYSE Arms has been running about average most of the day and is currently .99. The US dollar continues to trade as if, at the very least, an intermediate-term bottom is in place and quite possibly a major bottom.The EIA said today that US oil demand fell 7% in February.This is a substantial decline.Global energy demand destruction remains much greater than perceived as the bubble in commodities grows ever larger.True “growth” stock leaders are especially strong today with many substantially outperforming the broad market.Fed fund futures currently imply an 80% chance for a 25 basis point rate cut and a 20% chance for no rate cut tomorrow.While a 25 basis point cut is still likely, I believe the odds of no cut are higher than the market currently perceives.The TED spread is falling 12 basis points today to 141 basis points, which is the lowest since April 8th.The 10-year TIPS spread, a good gauge of inflation expectations, is falling 4 basis points today to 2.28% on the decline in commodity prices. This spread is down 40 basis points from a high of 2.68% on March 13th.Weekly retail sales rose 1.7% this week.Weekly retail sales averaged a gain of 1.7% during the entire month of April, up from a .6% average weekly gain during February and a .9% average weekly gain during March.I suspect tomorrow’s 1Q GDP growth will come in below estimates of a .5% gain as the deflator subtracts more from growth than expected, which could pressure stocks modestly in the morning.I still believe two consecutive quarters of US GDP contraction, the technical definition of a recession, are unlikely and expect GDP to grow slightly this quarter before a more meaningful acceleration towards year-end.Nikkei futures indicate an +56 open in Japan and DAX futures indicate an +65 open in Germany tomorrow. I expect US stocks to trade mixed into the close from current levels as lower energy prices, less earnings pessimism and diminishing credit market angst offset profit-taking and commodity stock weakness.

- Crude oil fell more than $3 a barrel, the biggest decline in four weeks, after BP Plc restarted a North Sea oil pipeline and the US dollar strengthened, reducing the appeal of commodities to investors.“For the first time in weeks we have some bearish factors in the forefront,” said Peter Beutel, president of energy consultant Cameron Hanover Inc.“We are finally seeing a stop to the buying-with-abandon.”

- Current credit prices reflect “unprecedented default levels” that can only happen in a deep recession, Man Group Plc, the world’s largest publicly listed hedge fund manager, said.The price levels represent an attractive opportunity for credit managers who are able to buy credit products at deep discounts, it said.“It is advantageous for distressed hedge funds to invest early, as spreads usually tighten quicker than they widen, especially for fundamentally sound companies,” said Man analysts led by Thomas Della Casa in the report.Banks have slashed their backlog of unsold leveraged loans, or lending to finance leveraged buyouts, to $95 billion, from $245 billion in July 2007, S&P said.Distressed assets hedge funds that invested at the November 2002 bottom of the 2001 to 2002 recession could have generated an annualized return of 21.9% over two years, Man said.

- Apple Inc.(AAPL), which plans to start selling its iPhone in Latin America, is reconsidering a strategy of offering the device only through exclusive franchises.The company may offer the handheld device through various phone companies in the same country.

Der Standard:- European Central Bank President Jean-Claude Trichet said current interest rates will help to curb inflation, citing an interview.“We believe that our current monetary stance will guarantee price stability over the medium term,” Trichet said.Trichet also said that “strong foreign exchange volatility is of course cause for concern.”

- Consumer Confidence for April fell to 62.3 versus estimates of 61.0 and an upwardly revised 65.9 in March.

BOTTOM LINE:Consumer Confidence fell less than economists expected this month, Bloomberg reported.The Present Conditions component of the index fell to 80.7 from 90.6 in March.The Expectations component of the index rose to 50.10 from 49.40 the prior month.Those planning to purchase an automobile rose to 5.6% versus 5.4% the prior month.Those planning to purchase a major appliance rose to 31.9% from 30.1% the prior month.Confidence in the northern regions of the country remains extraordinarily depressed, averaging 45.7.Confidence in the remaining regions of the country currently averages 71.7.Consumer Confidence in the Northeast Central Region, which is the lowest in the country, is currently 41.8.Most major media outlets and hedge funds are headquartered in this region.At its very worst during the 2000-2003 technology bubble-bursting bear market, in which the Nasdaq collapsed over 70%, confidence in the Northeast Central Region hit 58.3 during the month of February 2003.The stock market had already made a major low four months earlier in October 2002.The DJIA is currently 8.3% from its all-time high hit in October of last year.While the current “US negativity bubble” shows few signs of bursting, I continue to believe consumer confidence will improve from current levels through year-end as stocks rise, the US dollar strengthens, energy/food prices fall, inflation decelerates, the job market improves, election uncertainty ends, the American Axle strike ends, the effects of fiscal/monetary stimuli take hold, extreme housing fears subside, credit turmoil ends and interest rates remain relatively low.

- International Business Machines(IBM) will team up with software companies to sell hardware and software to small and medium-sized business over the Web.The online marketplace will be called the Blue Business Platform.

BOTTOM LINE: Asian indices are mostly lower, weighed down by shipbuildering and airline shares in the region.I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Biotech longs, Computer longs, Internet longs and Medical longs.I have not traded today, thus leaving the Portfolio 100% net long. The overall tone of the market is bullish as the advance/decline line is higher, most sectors are rising and volume is below average. Investor anxiety is slightly above average. Today’s overall market action is bullish. The VIX is falling .7%, but remains above average at 19.4. The ISE Sentiment Index is below average at 125.0 and the total put/call is about average at .91. Finally, the NYSE Arms has been running about average most of the day and is currently 1.0.Oil’s inability to rally today despite a weaker dollar and weekend production declines in the UK and Nigeria related to strikes is noteworthy.I said last week that I believed the bubble in fertilizer stocks would likely burst over the coming months.While it is still too early to tell if that is occurring now, the group trades poorly.The Philippine Stock Exchange Index fell another 1.4% last night to the lowest level since November 2006.The index is now down 29.7% from it high hit during October of last year.I continue to believe developed markets, in general, will substantially outperform emerging market indices over the next five years.According to Intrade.com, the odds of a US recession beginning this year have declined to 46.3% from 79.0% last month.This is the first time since early January that the odds of recession have fallen below 50.0%.The G-7 Currency Volatility Index(VXY) is falling another 3% today to 10.66, which is the lowest since February 28.Finally, the European Financial Sector Credit Default Swap Index is dropping another 6.7% today to a new low of 60.8 basis points, which is also a big positive.The (XLF) is near session highs, rising .6%.Nikkei futures indicate an +131 open in Japan and DAX futures indicate an +47 open in Germany tomorrow.I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less earnings pessimism and diminishing credit market angst.

- Global copper production will outpace demand this year and next as consumption growth slows, the International Copper Study Group said.The surplus will be 85,000 metric tons this year and 429,000 tons in 2009.Supply fell 37,000 tons short of demand lat year, the ICSG said.Copper usage in China, the world’s largest buyer, will expand more slowly than last year’s 36%.Combined with a decline in consumption in the US, world usage will gain 2% this year, down from growth of 6.4% last year.Mine production will rise 6%, faster than last year’s 3%.In 2009, output will rise 9%.

- The risk of US companies defaulting fell again, according to traders of credit-default swaps.Contracts on the Markit CDX North America Investment Grade Index of 125 companies in the US and Canada fell 3 basis points to 96.5 in NY, according to broker Phoenix Partners Group.

- European Central Bank President Jean-Claude Trichet reiterated that he’s concerned about a surge in the euro against the dollar.“We had observed sharp fluctuations in the recent period of time and I have concerns about the repercussions of these sharp fluctuations on financial stability,” Trichet said.

Punch:- Nigeria’s daily crude oil production has fallen to less than 1 million barrels a day after shutdowns.Strikes have closed all 860,000 barrels a day of output at an ExxonMobil facility while Shell has closed 169,000 barrels a day of exports.The combined losses are 1.03 million barrels a day out of 2.02 million barrels a day of production.Nigeria is losing $103 million a day because of the shutdowns, based on an average price of $100 a barrel.

Saudi Press Agency:- Saudi Arabian annual inflation accelerated to a record 9.6% in March from 8.7% in February.Food costs increased 14.2%, while fuel and water prices and rents climbed 15.8%.

The positions and strategies discussed on BETWEEN THE HEDGES are offered for entertainment purposes only and are in no way intended to serve as personal investing advice. Readers should not make any investment decision without first conducting their own thorough due diligence. Readers should assume the editor of this blog holds a position in any securities discussed, recommended or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in anyway, considered liable for the investment performance of any securities or strategies discussed.